Taxation of Individuals
Employees
Students
Children
Home Renovation Tax Credit (2009)
Refundable Medical Expense Supplement
Mineral Exploration Tax Credit
ELIGIBLE DIVIDENDS
Virtually all dividends received from a publicly traded company will be “eligible” dividends
Canada Revenue Agency’s intent is to provide integration of high-rate business income by increasing the dividend gross-up to 45% and increasing the dividend tax credit (DTC) on “eligible dividends”
Gross-up
- 45% of eligible dividends
Federal DTC
- 11/18 times amount of the gross-up
- 18.97% of grossed-up dividend
Ontario
| Year | DTC | Effective Rate |
| 2006 | 6.50% | 25.09% |
| 2007 | 6.70 | 24.64 |
| 2008 | 7.00 | 23.96 |
| 2009 | 7.40 | 23.06 |
| 2010 | 7.70 | 22.38 |
In prior years the effective tax rate was approximately 31%.
DONATIONS
No taxable capital gain will result from the donation of publicly traded securities or ecological property to a charity (other than a private foundation).
- The inclusion rate is zero.
- The donation receipt is for the value of the gift.
- All of the gain will be added to a private corporation’s capital dividend account.
- Effective for donations after May 1, 2006.
The additional deduction from taxable income, where shares, which are acquired under an employee stock option and are donated within 30 days, will be increased.
- Effectively reduces the employment benefit to nil.
AN EXAMPLE OF DONATIONS OF MARKETABLE
SECURITIES
An individual plans to sell marketable securities that have a FMV of $100,000 and an ACB of nil. The individual is going to donate $100,000 to a charity, other than a private foundation, after May 1, 2006.
Tax savings by donating securities:
|
Tax savings on donation |
$46,410 |
|
Tax on $50,000 taxation capital gain – 46.41% |
23,205 |
|
Total savings |
$69,615 |
|
====== |
TRADEPEOPLE’S TOOLS
Tradespeople can deduct up to $500 of the cost of new tools acquired in excess of $1,000 after May 1, 2006.
- Deduction is limited to lesser of the cost of eligible tools and employment income as a tradesperson less $1,000.
- The $1,000 base will be indexed.
- In addition to Canada Employment Credit.
- Employer must certify requirement to provide tools.
- The only electronic tools that qualify must be used for the purpose of measuring, locating or calculating (i.e., cell phones and computers won’t quality).
- The base amount for the deduction for Apprentice
Mechanics tools will be increased to $500 plus the amount of the Canada
Employment Benefit.
CANADA EMPLOYMENT CREDIT
Non-refundable credit to help alleviate the fact that certain employment related expenses cannot be claimed.
- For 2006, it is based on the lesser of employment income and $250.
- For subsequent years, it will be based on the lesser of employment income and $1,000 (subject to indexing).
- Employees who deduct commission expenses will also be entitled to this credit.
A non-refundable credit for transit passes for buses, trams, subways, trains, and ferries will be eligible but must be for a duration of at least 28 days.
- Must be reasonable to expect the individual will return daily to the place of departure.
Can claim transit passes for individual, spouse/partner and children who under age 19 at the end of the year.
The CRA wants the pass to display the following information:
- an indication that it is valid for a month or longer;
- the date or period for which the pass is valid;
- the name of the transit authority or organization issuing the pass;
- the amount paid for the pass; and,
- the identity of the rider, either by name or unique identifier.
- Alternative support may be allowed, such as proof of payment (CRA News Release – June 19, 2006)
Effective for the cost of transit passes used after July 1, 2006 (If bought before – prorate)
SCHOLARSHIPS
All scholarships, fellowships and bursaries received in connection with the enrolment in a program eligible for the education credit will be exempt from taxation.
- Currently the exemption is $3,000
- Effective for 2006
TEXTBOOK TAX CREDIT
Students will be eligible for a new tax credit to recognize the cost of textbooks
- Full-time students $65 / month
- Part-time students $20 / month
The amounts will be added to tuition and education amounts for purposes of transfers to supporting individuals and carryforward provisions.
Effectively, this is an increase in the education credit.
Applicable to 2006 and subsequent years.
CANADA CHILD TAX BENEFIT
The Child Disability Benefit was increased from $2,044 to $2,300 on July 1, 2006.
UNIVERSAL CHILD CARE BENEFIT
All families will receive $100 per month for each child under the age 6.
- Commencing July 1, 2006
- Taxable to the spouse with the lower income.
- Will not be included in income for income-tested
benefits including:
- GST tax credit
- Canada Child Tax Benefit (CCTB)
- Old Age Security and supplement
- Employment insurance
- Actual child care expenses, which are deductible for income tax purposes, will not be reduced by the amount of the benefit.
The CCTB supplement for children under the age of 7 will be eliminated, effective July 1, 2006, for children who are under age 6 at that time.
- For children who are 6 on July 1, 2006, the CCTB supplement will be eliminated at the early of the date they turn 7 or July 1, 2007.
CHILDREN’S FITNESS TAX CREDIT
A non-refundable credit based on up to $500 of eligible fees for programs of physical activity for each child under the age 16.
- Effective January 1, 2007
- Can be claimed by either parent
- Eligible expenses will include those for the operation and administration of the program, instruction, renting facilities, equipment used in common (e.g. team jerseys provided for the season), referees and judges, and incidental supplies (e.g., trophies).
- Ineligible expenses include the purchase or rental of equipment for exclusive personal use, travel, meals and accommodation.
- A committee is examining which programs should qualify.
- Must have a tax receipt suitable to the CRA.
- Organizations must keep relevant books and records.
The HRTC can be claimed for most renovations or alterations to your home or property that are permanent in nature. As a rule of thumb, if the item you purchase will not become a permanent part of your home or property, it is not eligible.
This would cover eligible expenses incurred for work performed or goods acquired after January 27, 2009 and before February 1, 2010.
Claiming your Home Renovation Tax Credit
A new line on schedule 1 will be incorporated in the 2009 personal income tax return to allow you to claim the credit. The receipts will not have to be forwarded to Canada Revenue Agency (CRA) unless specially requested. Please note that documentation such as agreements, invoices and receipts must clearly identify the type and quantity of goods purchased or services provided including but not limited to:
· Vendor/contractor name, their business address and if applicable their GST/HST registration number
· Description of goods or services provided and the date when the goods were purchased and delivered or services rendered.
· Amount of invoice and proof of payment
Complete details available for printing or viewing online
REFUNDABLE MEDICAL EXPENSE SUPPLEMENT
The amount of the Refundable Medical Expense Supplement is increased to $1,000 for 2006.
PENSION INCOME CREDIT
Effective 2006 - The base for the pension income credit will be increased to $2,000.
MINERAL EXPLORATION TAX CREDIT
The 15% credit is reintroduced for investments in certain flow-through shares.
- For expenditures in the period May 1, 2006 to December 31, 2007.
- Prior credit had expired December 31, 2005.
Indexed Amounts For 2006
| Federal | Ontario | |
| Basic personal amount |
|
|
| Spousal/equivalent-to-spouse |
|
|
| Net income threshold |
|
|
| Infirm dependant amount (over 18) |
|
|
| Net income threshold |
|
|
| Caregiver amount |
|
|
| Net income threshold |
|
|
| Age amount |
|
|
| Net income threshold |
|
|
| Adoption credit |
|
|
| Pension credit |
|
|
| Employment credit |
|
|
| Disability amount |
|
|
| Supplementary if under 18 |
|
|
|
Reduced for child care and disability
supports deduction claimed by anyone in excess of |
2,303 |
2,313 |
| Medical expense tax Credit |
|
|
| 3% of net income ceiling |
|
|
|
Education & Textbook – full time (monthly) - part time (monthly) |
140 |
135 |
| Tuition and education transfer (max) |
|
|
| Old Age Security – threshold to repay |
|
|
RRSP CONTRIBUTION LIMITS
|
Year |
Limit |
Required in Prior Year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|